Liverpool City Region Combined Authority (Business Rate Supplements Functions) Order 2018
West of England Combined Authority (Business Rate Supplements Functions) Order 2018
West Midlands Combined Authority (Business Rate Supplements Functions and Amendment) Order 2018
Motions to Approve
That the draft Orders laid before the House on 4 and 7 June be approved.
My Lords, the draft orders, if approved and made, will confer the power to raise a business rate supplement on to the Cambridgeshire and Peterborough, Liverpool City Region, West of England, and West Midlands combined authorities, to be exercised by their respective mayors.
The order for the West Midlands Combined Authority will implement a commitment, made in the second devolution deal that the Government agreed with the West Midlands Combined Authority and announced at the Autumn Budget, that we would,
“subject to the agreement of Parliament, provide for the Mayor of the West Midlands Combined Authority to have the power to introduce a business rate supplement, which would be subject to a ballot of affected businesses”.
It also amends the list of roads comprising that combined authority’s key route network. Mayors of combined authorities are responsible for driving economic growth and regeneration in their areas.
We recognise that, to succeed, mayors need the right resources to enable investment in economic growth priorities. That is why we have agreed ambitious long-term investment funds with mayoral combined authorities amounting to £20 million a year to Cambridgeshire and Peterborough, £30 million a year to Liverpool City Region and to the West of England, and £36.5 million a year to the West Midlands, and empowered them to direct funding in their areas, including skills and employment, housing and transport. This was further enhanced by the announcement at Budget 2017 of an ambitious £1.7 billion transforming cities fund for essential investment in improving transport within cities, with £74 million going to Cambridgeshire and Peterborough, £80 million to the West of England, £134 million to Liverpool City Region, and £250 million to the West Midlands. We have also launched a mayoral capacity fund of £2 million over two years for each of these combined authorities to help to ensure that these institutions have the right skills to deliver on what matters in their areas.
We are now going further by enabling mayors to raise a business rate supplement of up to 2p in the pound to promote real, long-lasting economic growth in their areas, such as through transport and digital connectivity.
Mayors are working with partners across their areas to provide a louder voice, strong co-ordination and clear accountability for local people. Such mayors are ideally placed to provide a strategic overview of the local infrastructure requirements and work closely with businesses on developing proposals that will benefit both business and the broader community. The business rate supplement could raise £15 million a year in Cambridgeshire and Peterborough, £16 million in the West of England, £17 million in Liverpool City Region and £35 million in the West Midlands to drive jobs, growth and productivity across the region.
Each mayor, combined authority and all constituent councils affected by these orders have consented to their making. The mayor will, rightly, need to put forward a convincing vision and use their visibility and position to build consensus with local businesses—culminating in a successful ballot of rate-paying businesses—before being able to deploy this power. Regardless of the outcome, the mayor must cover the cost of consultation and ballot. County councils, unitary district councils and the Greater London Authority already have the power to levy a supplement on business rates. These orders will extend that power to the Cambridgeshire and Peterborough, Liverpool City Region, West of England and West Midlands combined authorities, in each case to be exercised by the mayor. The business rate supplement will have the same purpose and be subject to the same safeguards, as with other levying authorities.
The supplement has a clear purpose: to raise funds for a project, or projects, that will promote economic development in the area. Money raised from the supplement must go towards projects that would not otherwise have gone ahead. This is about creating additional value. The funds cannot be put towards the authority’s day-to-day costs or for services it has existing obligations to provide. Before levying any supplement, the mayor is required to consult on and publish a prospectus setting out the benefits of the proposed project the supplement would fund. It is crucial that there is a clear vision for what the supplement will help to deliver, and that affected businesses are fully engaged in the process. The proposed supplement is then subject to a ballot of those businesses that would be affected. It must be approved by a majority of affected individual business rate payers who vote, and the aggregate rateable value of those businesses in favour who vote must exceed those against. The supplement, or supplements aggregated, cannot exceed 2p in the pound of rateable value.
The legislation protects smaller businesses. The supplement may be levied only on business properties with a rateable value of £50,000 or more. That level means that between 85% and 90% of business properties in these combined authority areas will not be required to pay the supplement. In addition, the mayor may increase but cannot reduce this threshold, and can apply any other reliefs as they may set out in the prospectus. The mayor will not use these powers lightly or indiscriminately, but where they can make a compelling case to the business community, demonstrating common cause and mutually desirable outcomes, this can open a valuable source of funds for mayoral projects. The Government seek to confer this power on to mayors who have asked for it. Before laying the draft order before the House, we obtained the consent of each mayor, combined authority and their constituent local authorities.
The West Midlands Combined Authority Order also provides the opportunity to make some necessary amendments to the key route network in the West Midlands, the map of roads of strategic importance which the combined authority has responsibility for. The key route network is crucial to serving the strategic demands of the area for the movement of people, goods and services—with large traffic volumes—and providing connections to the national strategic road network.
The West Midlands Mayor, with the assistance of the combined authority, exercises concurrently with councils in the area highway and traffic functions in relation to agreements with strategic highway companies, road traffic reduction, permit schemes and highway bridge or transport works. These minor amendments would ensure that the definition in legislation properly describes all roads that are part of the strategic network of key local roads.
We seek parliamentary approval to make these orders, drafts of which we are considering today, to help boost local growth in the areas of the combined authorities while ensuring that affected businesses have the opportunity to approve any supplement in a ballot.
My Lords, I again remind the House that I am a vice-president of the Local Government Association. I welcome these orders. I am a firm believer in voluntary taxation, and the system used in this case with the business rate supplement is similar to that used for business improvement districts. In that respect, it is a procedure that can command public support: if the business rate payers involved do not want to pay the money they have the right to reject it in a ballot. There is therefore a democratic process, which is very helpful.
On average, around 90% of business rate payers under any of these four orders will not be paying any additional money. Around 10% in Cambridge and 14% in Peterborough will have to pay a bit more. The Minister kindly read out the total sums of money that could be raised with a 2p in the pound levy. Clearly, rateable values vary. Could the Minister, either now or in writing, tell us the highest amount that might have to be paid by a business rate payer in each of these four areas, given that the threshold is to be a £50,000 valuation but some clearly have a higher valuation than that? Of the £35 million in the West Midlands, say, what is the highest single amount that might have to be paid by a business rate payer?
Overall, I do not think that these orders relate to the overall structure of combined authorities. There have been debates about mayors’ powers and the fact that the scrutiny systems need to be made stronger in combined authorities. Of course, in London an assembly lies behind the mayoral structure, which does not exist for the combined authorities elsewhere in England. All that having been said, the specific process relating to a business rate supplement stands on its own. It seems appropriate and should be supported.
My Lords, I also draw the attention of the House to the fact that I am a vice-president of the Local Government Association. I am generally happy to support the orders before the House, but there is a point to be made about business rates. I accept that this is a supplement and in that sense it could be subject to a referendum, a plan and stuff, but there is the point about business rates in general and what business has to pay in an area. We have many questions here about the cost to business of further taxation. In the West Midlands, for example, if a further £35 million is raised, what does that do to the economy? Is that the best use of that money?
That then comes back to the whole issue of combined authorities. Where they are established, the funding provided by government is relatively small. I am sure the noble Lord will not agree, but I have made the point before to his noble friend Lord Bourne that we have this rather confusing patchwork of local government emerging in England. We need a clear structure that we will get to. I am all in favour of devolution, but I would like to understand what the plan is. Certain places will potentially have four, five or maybe six authorities, whereas in another place there will be just one. That does not seem to be very good government at all. I am all in favour of devolution, but I am not convinced that the combined authority model is the best way forward.
I am happy to support the orders, as I said. I welcome the fact that the supplementary rates will have to be subject to a ballot. That is good news, but generally there is the whole issue of business rates and the effect on businesses, particularly on the high street.
My Lords, I am grateful to both noble Lords for their support for the measures before the House. I say to the noble Lord, Lord Shipley, that the average increase, if we go ahead with 2p in the pound, is 4% on the business rate bill, but I would like to write to the noble Lord—a generous suggestion that he made—setting out what the highest amount might be in the highest rateable-value property in a particular area.
I am grateful to the noble Lord, Lord Kennedy, for his broad support. I know that he finds these differing structures untidy and has complained about them before, but the Government are responding to what local people want, which varies in different parts of the country so different patterns emerge. I am not sure that I can take the debate any further today. Doubtless, when we have future debates on combined authorities, I will make the same point. In the meantime, I commend the orders.